A flipping plan that's a bit too risky

Dear Dave,

My husband and I want to do a live-in and flip real estate purchase. The idea is to buy a fixer-upper and rent out the basement to help with the mortgage payments. How do you feel about ideas like this?

Erin

Dear Erin,

In a situation like this you need to do a basic business analysis. You've got to have a plan in place, and you've got to figure out the worst-case scenario. Part of this is determining whether you can survive if things fall apart. In this case, the worst case is that you can't get a renter, and the house doesn't sell. It puts your family in jeopardy, so to me it's not an option.

Want my honest opinion? I think you've both got a case of house fever right now. The possibility I just mentioned isn't a rare occurrence. Lots of people have had the same idea, with the best of intentions, and still wound up in a big mess. I love real estate. I mean I really love real estate. And I've flipped more than a few houses in my day. But the particulars of this deal make me a little nervous. If you and your husband are willing to accept the possibility of things not working out like you planned – and the fact you might have to take additional jobs for an unknown length of time just to make ends meet – then it might be a play. But for me? Nope. I don't like putting myself into these kinds of situations.

When I was much younger, I was willing to do all kinds of dangerous stuff and ignore the risk. But going broke decades ago knocked that kind of thinking out of me in a hurry. Any deal that runs the risk of leaving you bankrupt, or the victim of a foreclosure, just isn't worth it, Erin.

Dave

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